The co-founder of Ethereum believes that the crisis of cryptocurrencies will provide an opportunity in the future to reduce the volatility of digital assets to the level of the volatility of stock markets.
Vitalik Buterin, in an interview with former Bloomberg Opinion columnist Noah Smith, said that the fall in the cryptocurrency market, which was catalyzed by the default of Terra Form Lads, has its advantages. Buterin explained that the fall in the price of cryptocurrencies exposed the weaknesses of the digital asset industry:
“Reducing prices will do a good job of revealing the problems that have been in the crypto industry from the very beginning. Unsustainable business models tend to be successful during a boom when all assets and investments are growing. This process can be temporarily supported by a constant influx of new dollars.
Buterin pointed out that the collapse of Terra Form Lads’ native LUNA token was a good example of how falling prices expose unsustainable business models:
“During the loss of the UST stablecoin dollar peg, we saw that the algorithmic stablecoin model no longer worked. This is most noticeable in extreme situations such as high leverage with Terra and Ponzi schemes, as was the case with the Bitconnect exchange.”
According to Buterin, the volatility of crypto assets in the medium term will decrease to a level similar to traditional assets:
“I think cryptocurrencies will definitely settle down and be about as volatile as gold or the stock market.”
A similar opinion is shared by the commissioner of the US regulator SEC Esther Pierce (Hester Peirce). She believes that the bearish trend in the cryptocurrency market will be good for the industry, but warns of an increase in the number of scammers “in these turbulent times.” At the same time, the CEO of MicroStrategy believes that the UST default showed that stablecoins are just an unfortunate market reaction to society’s need for a digital dollar.
Source: Bits
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